In the last few years, there have been many changes to the way that the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) implements the federal affirmative action regulations. The agency has issued many new and revised regulations that have affected organizations throughout the United States. OFCCP has taken some particularly aggressive positions in regard to discrimination that it believes is occurring involving compensation and hiring in the private sector. These positions have caused much frustration for employers.

While compliance reviews by OFCCP are a major concern for some employers, not all organizations are subject to an OFCCP review. The particular federal affirmative action regulations that an organization must comply with depend on a number of factors, and this picture is becoming more complicated because some of these factors are changing.

What is Jurisdiction?

In order to conduct a compliance review, OFCCP must have jurisdiction to do so. “Jurisdiction” in this context involves the question of whether OFCCP has the right to conduct a compliance review of an organization. OFCCP cannot simply assert that an organization is subject to the federal affirmative action regulations. Instead, the agency must demonstrate that the organization meets various requirements and thresholds in order to proceed with a review.

There are two important things to note about jurisdiction issues. First, it is OFCCP’s responsibility to demonstrate that it has the right to conduct a compliance review. OFCCP compliance officers will occasionally ask an organization to provide information on the federal contracts or subcontracts the organization holds. While compliance officers are certainly allowed to ask this kind of question, organizations are NOT required to show that there is a federal contract or subcontract that gives OFCCP jurisdiction. If there is a question as to whether an organization can be reviewed by OFCCP, the agency must prove that it has the right to move forward with the review.

Second, there are some rights that organizations can waive through certain actions, but organizations never lose the right to argue that OFCCP does not have jurisdiction to conduct a compliance review. For example, by turning over various documents to OFCCP, an organization may inadvertently waive its right to attorney-client confidentiality concerning these documents. Conversely, an organization can always argue that OFCCP has no right to conduct a compliance review, even if the organization has been in the midst of the review for an extended period. Whether OFCCP actually does have jurisdiction is a factual issue that may need to be decided by a court. However, OFCCP must be able to demonstrate it has the right to conduct a review, even when an organization has willingly gone through previous compliance reviews and/or is in the midst of a current compliance review.

Factors That Affect Jurisdiction

There are a number of factors that affect whether OFCCP has jurisdiction to review an organization. Among these factors are the following:

Does the organization hold a federal contract or subcontract?

What type of organization is involved?

How large is the organization?

How large is the dollar amount of the federal contract or subcontract?

To further complicate this matter, the three federal affirmative action laws that OFCCP enforces answer these questions differently. These three laws are as follows:

Executive Order 11246, which requires organizations to take affirmative action for minorities and females and prohibits discrimination against applicants and employees based on race, ethnicity, color, gender, sexual orientation, gender identity, and religion

Section 503 of the Rehabilitation Act of 1973 (Section 503), which requires companies to take affirmative action for and prevent discrimination against individuals with disabilities

In this article, I’m going to address several of the factors noted above and how they are interpreted differently for each of the three laws that OFCCP enforces. Jurisdictional issues can be difficult, though, and it would be impossible to discuss all jurisdiction-related issues in one short (or perhaps not-so-short) article. A very important set of issues that I’m not going to cover involve questions about whether an organization holds a federal contract or subcontract. The difference between federal contracts and federal grants, OFCCP’s authority over certain types of suppliers (i.e. subcontractors) to federal contractors, and OFCCP’s suggestion that FDIC and FSLIC insurance are contracts that give the OFCCP jurisdiction over financial institutions are all jurisdiction-related subjects that will be left for another day.

OFCCP Produces an Infographic on Jurisdiction

In September of 2015, OFCCP released an infographic on its website that outlines thresholds regarding the number of employees and contract dollar amounts that give the agency jurisdiction. The infographic is divided into two columns, one for supply and service organizations and one for construction organizations. The infographic is further divided into three sections, one for each of the laws that OFCCP enforces. Each section has two rows, one regarding what the agency calls “basic coverage” and one regarding what the agency generally calls “AAP coverage.” The infographic is packed full of interesting information as well as at least one surprise for federal contractors and subcontractors.

“Supply and Service” Contractors vs. Construction Contractors

The first thing to note about the infographic is the distinction made between supply and service organizations and construction organizations. A “supply and service” organization is basically any organization that does not do construction work. Manufacturing companies, pharmaceutical companies, accounting firms, banks, universities, and non-profit organizations are all considered “supply and service” organizations under the federal affirmative action regulations. Companies that erect buildings, work on road building projects, or provide electrical or plumbing services may be considered “construction” companies under the federal affirmative action regulations.

There are various interesting rules concerning construction contractors and subcontractors. While the regulations under Executive Order 11246 are very different for construction companies than they are for supply and service organizations, the regulations under VEVRAA and Section 503 for direct construction contractors and some construction subcontractors are the same as they are for supply and service organizations. Construction subcontractors working on federally-assisted projects such as road-building projects where federal money is funneled through a state department of transportation are NOT subject to any of the requirements under VEVRAA or Section 503, while they ARE subject to the requirements under Executive Order 11246.

Basic Coverage

OFCCP’s infographic deals with the distinction between construction companies and supply and service organizations. The infographic notes that there are thresholds relating to the number of employees and dollar amounts in order to be covered by the federal affirmative action regulations. The infographic shows two levels regarding coverage for supply and service organizations: “basic” coverage and “AAP” coverage. The infographic also shows two levels regarding coverage for construction companies: “basic” coverage and “non-basic” coverage. (See below for more on what constitutes “non-basic” coverage for construction companies.)

This idea of “basic” and “AAP” or “non-basic” coverage may come as a surprise to some federal contractors and subcontractors, who have often been told that OFCCP only has jurisdiction and may only conduct a compliance review when a company has 50 or more employees and a single contract or subcontract of $50,000 or more. In fact, it has long been the case that this idea of a “50/50” jurisdiction level does not adequately describe an organization’s responsibilities under the federal affirmative action laws or OFCCP’s right to conduct a compliance review.

While there is a limit to what must be done when a contractor or subcontractor only meets the jurisdictional thresholds for basic coverage, there ARE actions that the organization must take. These actions vary depending on which of the three affirmative action laws are at issue.

Basic coverage under the Executive Order requires organizations to, among other things, prevent discrimination on the bases covered by the Executive Order (i.e. race, gender, sexual orientation, etc.), include an EEO tag line in all advertisements, send a notice to labor unions, and include a reference to the Executive Order in all covered subcontracts and purchase orders.

Basic coverage under Section 503 requires organizations to, among other things, prevent discrimination against individuals with disabilities, review mental and physical job requirements, provide accommodation for an individual with a disability when there is a reasonable request to do so, post the “EEO is the Law” poster so that it can be seen by applicants and employees, include a specific reference to disability in the EEO tag line included on all advertisements, and include specific language in covered subcontracts and purchase orders.

Basic coverage under VEVRAA requires organizations to, among other things, prevent discrimination against protected veterans, provide accommodation for disabled veterans when there is a reasonable request to do so, post the “EEO is the Law” poster so that it can be seen by applicants and employees, include a specific reference to veteran status in the EEO tag line included on all advertisements, and include specific language in covered subcontracts and purchase orders. Basic coverage under VEVRAA also includes various requirements related to listing information with the relevant state employment service (or, in the language of the veterans regulations, the employment service delivery system).

OFCCP’s revised veteran and disability regulations, which came into effect in March of 2014, added a number of basic coverage requirements that federal contractors and subcontractors must meet.

Thresholds for Basic Coverage: Number of Employees and Dollar Amounts

OFCCP’s infographic provides information on employee and dollar thresholds associated with the basic coverage requirements found in the federal affirmative action laws. These basic coverage thresholds are the same for supply and service organizations and for construction companies.

For each of the three laws, there is no lower threshold in regard to number of employees in order for coverage to occur. Thus, a one-person business would be eligible for coverage. In regard to number of dollars, the following apply:

For basic coverage under Executive Order 11246, a contractor or subcontractor generally must have a single contract of more than $10,000. The regulations under the Executive Order indicate that there is no dollar limit for financial institutions that act as depositories of federal funds or that act as issuing and paying agents for U.S. savings bonds and savings notes.

For basic coverage under Section 503, a contractor or subcontractor must have a single contract of more than $15,000. Note that the amount shown on OFCCP’s infographic was something of a surprise to many federal contractors and subcontractors, as the Section 503 regulations themselves indicate that the dollar threshold is at $10,000, just as it is with the Executive Order. However, because of the impact of certain parts of the federal acquisitions regulations (FARs), the threshold for basic coverage under Section 503 must be indexed to inflation, and thus the current threshold is $15,000.

For basic coverage under VEVRAA, the OFCCP infographic indicates that a contractor must have a single contract of $100,000 or more. However, the FARs also affect the threshold for basic coverage under VEVRAA. Thus, the actual threshold for VEVRAA coverage should be shown as $150,000, not $100,000. OFCCP should be releasing a revised version of the infographic and/or other information on its website regarding the increase in the VEVRAA threshold in October or November of 2015.

As to financial institutions, there is no provision in the veteran or disability regulations paralleling the provision in the Executive Order in regard to acting as a depository of federal funds or as an issuing and paying agent for savings bonds and notes.

Non-Basic Coverage

Along with basic coverage, there is another level of coverage under OFCCP’s regulations. For the most part, the OFCCP infographic refers to this level of coverage as “AAP Coverage.” However, for construction contractors and subcontractors, OFCCP refers to this second level of coverage under Executive Order 11246 as “16 Specifications.” The requirements associated with non-basic coverage include, but are not limited to, the following:

For supply and service contractors and subcontractors, non-basic (i.e. AAP) coverage under Executive Order 11246 requires the preparation of affirmative action plans that include various statistical reports regarding the race, ethnicity, and gender of employees, efforts to recruit and select minorities and females in areas where there are placement goals, an analysis of compensation systems to ensure there are no disparities based on race, ethnicity, or gender, and a review of personnel activity to ensure there has been no discrimination against applicants or employees based on the classes protected by the Executive Order.

For construction contractors and subcontractors, non-basic coverage under Executive Order 11246 requires the establishment of placement goals for trades positions and a variety of actions found in 16 sub-points in the regulations for construction contractors and subcontractors. Construction contractors and subcontractors have NO requirement to prepare a formal written affirmative action plan under Executive Order 11246.

For all contractors and subcontractors (except subcontractors working on federally-assisted projects), non-basic (i.e. AAP) coverage under Section 503 requires the preparation of affirmative action plans that include certain narrative and statistical reports, surveying of applicants and employees for disability status, efforts to recruit and select individuals with disabilities, documentation and analysis of recruitment efforts to find individuals with disabilities, and the development of an EEO/affirmative action policy statement with certain prescribed language.

For all contractors and subcontractors (except subcontractors working on federally-assisted projects), non-basic (i.e. AAP) coverage under VEVRAA requires the preparation of affirmative action plans that include certain narrative and statistical reports, surveying of applicants and employees for veteran status, efforts to recruit and select protected veterans, documentation and analysis of recruitment efforts to find protected veterans, and the development of an EEO/affirmative action policy statement with certain prescribed language.

OFCCP’s revised veteran and disability regulations that came into effect in March of 2014 added an extensive number of non-basic (i.e. AAP) requirements that federal contractors and subcontractors, including construction contractors and subcontractors, must meet.

Thresholds for Non-Basic Coverage: Number of Employees and Dollar Amounts

OFCCP’s infographic provides information on employee and dollar thresholds associated with the non-basic coverage requirements found in the federal affirmative action laws.

For non-basic (i.e. AAP) coverage under Executive Order 11246, a supply and service contractor or subcontractor must have 50 or more employees in its total organization and generally must have a single contract or subcontract of $50,000 or more. As is the situation for basic coverage, the regulations under the Executive Order indicate that there is no dollar limit for financial institutions that act as depositories of federal funds or that act as issuing and paying agents for U.S. savings bonds and savings notes. However, the requirement to have 50 or more employees does apply to financial institutions like it applies to other supply and service contractors.

For non-basic coverage under Executive Order 11246, there is no lower limit on the number of employees a construction contractor or subcontractor must have. The construction contractor or subcontractor must meet the 16 specifications and various other affirmative action requirements when there is a contract or subcontract of $10,000 or more.

For non-basic (i.e. AAP) coverage under Section 503, a contractor or subcontractor must have 50 or more employees in its total organization and generally must have a single contract or subcontract of $50,000 or more. These limits apply to both supply and service organizations and construction companies (though construction subcontractors working on federally-assisted projects are exempt from coverage).

For non-basic (i.e. AAP) coverage under VEVRAA, OFCCP’s infographic indicates that a contractor or subcontractor must have 50 or more employees in its total organization and generally must have a single contract or subcontract of $100,000 or more. These limits apply to both supply and service organizations and construction companies (though construction subcontractors working on federally-assisted projects are exempt from coverage).

There are two important things to note about the VEVRAA thresholds for AAP coverage. First, the dollar amount is different than the threshold for coverage under the Executive Order and Section 503. Thus, an organization with a contract of $75,000 might be required to prepare affirmative action plans and take various other actions under the Executive Order and Section 503, but that same organization would have NO affirmative action responsibilities under VEVRAA. This is because the basic coverage dollar threshold as well as the AAP threshold on OFCCP’s infographic require a $100,000 contract for any VEVRAA provisions to apply.

Second, the VEVRAA threshold for AAP coverage should be rising to $150,000 as part of the indexing that is associated with the Section 503 and VEVRAA thresholds. It will be important to watch for any revised version of the infographic and other information OFCCP makes available in this regard.

As to financial institutions, there is no provision in the veteran and disability regulations paralleling the provision in the Executive Order in regard to acting as a depository of federal funds or as an issuing and paying agent for savings bonds and notes.

Conclusion

Jurisdiction issues are important in determining whether OFCCP reviews should go forward and which organizations should be subject to review. In light of the many new requirements in OFCCP’s revised regulations for veterans and individuals with disabilities as well as certain new requirements in the agency’s regulations under Executive Order 11246, it is more important than ever to know which, if any, of OFCCP’s regulations apply to your organization. It is no longer safe to assume that if your organization has 50 or more employees and receives $50,000 or more in federal funds that your organization is fully covered by all the federal affirmative action regulations, just as it is no longer safe to assume that if your organization has less than 50 employees or receives less than $50,000, your organization has no affirmative action responsibilities. Since jurisdiction issues can be problematic, there is value in contacting your legal counsel or a capable advisor if your organization has questions about jurisdiction.